State Bank of Pakistan announced that it has just reduced the rate of interest on car financing products. It doesn’t matter that you have leased car last year or planning to go for a new one. You just don’t need to worry about at all, it will cost you 50% cheaper.
Commercial banks are also going to reduce their rate, because of reduction in the same from State Bank of Pakistan. Because any amendment in the rates of monetary policy of State Bank of Pakistan gets directly deem to be effective on the other banks as well.
To put it differently, when the monetary policy rate peaked to 13.25% in July 2019 the interbank rates (called KIBOR or K) were close to 14%. And commercial banks were charging you K plus 4% to 7% or even more. It took the overall cost of your interest payment to anywhere between 18% and 21%. These rates remain fixed for one year.
SBP wants to boost economy by providing relief to leased car owners
The State Bank of Pakistan brought down its rate to 7% and KIBOR also got fluctuate to 7.9%. It means you are going to have a 50% reduction in the interest amount; it doesn’t matter if you have leased a new car or you are having a previously leased one. The installment of the coming year will be paid according to this reduction of 50% in interest.
SBP had not announced this recent interest cut officially. The objective is to stimulate the economic growth. As low as the interest rates which make borrowing cost effective for individuals, businesses and the government who borrows excessively and also spends in the same manner. The gesture usually pumps the positive activities in the economy and creates more jobs.
Though our economy has shifted to a lower gear and risk of growth is still in acceleration mode due to the lock-down amid COVID-19 pandemic. Because of the chance of another wave of virus shoot. Recovery pattern has remained very shaky and uncertain.
That is exactly the reason behind the decision of the central bank that they have decided to back the rate of economy and employment.
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